Mortgage rates on 30-year, fixed rate loans are hovering near the lowest level on record since 1951. While some home buyers are putting their home purchases on hold hoping rates will go even lower, many industry experts are advising homeowners with rates in the upper 4 percent range to refinance.
MAKING SENSE OF THE STORY FOR CONSUMERS
Homeowners with rates in the upper four percent range are likely to benefit from refinancing, according to Peter Ogilvie, president of First Residential Mortgage Corp. in Santa Cruz, Calif. He says refinancing to a lower rate often produces monthly savings, as long as the borrower can qualify under today’s industry credit guidelines and loan-to-value underwriting standards.
Some homeowners also may be good candidates for no-cost refinancing, where the title, escrow, and lender closing charges either are added to the mortgage principal balance or paid for over time with a slightly higher rate. The upsides to this option are reduced monthly payments, improved cash flow, and no outset of dollars at settlement.
Borrowers who want to become debt-free faster and can afford it, ought to consider refinancing out of a 30-year term loan into a 15-year term. Fifteen-year mortgages carry lower rates than 30-year loans, but their faster amortization schedules require higher monthly payments.
When considering whether refinancing is the best option, consumers are advised to take into account all of the fees associated with the refinance and decide if the money saved is worth the cost of the refinance.
You know that when you are seeking a mortgage you should shop around for the best rate. But because interest rates fluctuate, it is a good idea to consider locking your rate. A rate lock, also called a “lock-in”, is a lender’s guarantee that you will get a specific interest rate and number of points if you purchase a home within a certain period of time.
If you do not complete your home purchase or refinancing agreement before the lock expires and interest rates happen to rise, you will pay the higher rate. If interest rates happen to drop during the lock period, however, you cannot take advantage of them unless you rewrite the lock and pay an additional cost.
Before locking in a rate, keep these tips in mind:
- Get your guaranteed rate lock in writing.
- Lock in as many of the costs as you can, including the interest rate and points.
- Shop around. Examine both the terms of the contract and its cost. Some lenders charge an up-front fee, while others offer the service at no cost.
Starting Jan. 1, 2010, the Federal Housing Administration will adhere to new credit standards and appraisal guidelines for FHA-insured mortgages. The new guidelines, which essentially align with HVCC rules, will prohibit the undue influence of appraisers, or the choosing of an appraiser, by mortgage brokers or commission-based lender staff. In addition, the FHA’s appraisal validity period will be reduced to four months for all properties including existing, proposed, and new construction. The action also provides new guidelines allowing a second appraisal to be ordered in some instances including when a borrower switches lenders.
for more info, go to www.hud.gob/office/adm/hudclips/letters/mortgagee
Buying a home is a big step and process can be complicated. That’s why it’s so important to have a knowledgeable real estate professional working to protect your interests.
One of the first things you should do when shopping for a home is to obtain prequalification for a home loan. This will help you understand your budget and narrow your home choices.
In order to get a mortgage, you will need to provide proof of income and assets. The amount of necessary paperwork will vary somewhat from lender to lender, but most likely you will need:
- Federal income tax returns for the previous two years.
- If you are self-employed, 1099 forms and year-to-date profit/loss statements.
- Three recent consecutive paycheck stubs.
- Three consecutive bank statements.
- Investment and savings account statements.
- Recent year’s canceled rent/mortgage check or other verification of payments.
- Documentation of additional mortgage loans or rental properties.
- Recent statements from each of your credit card companies.
- Recent statements or other documentation of car loans, student loans and other debt obligations.
- Divorce documents or other legal documentation, if applicable.
If you have questions or concerns, feel free to contact me anytime.
Brian Ripp, CRS, GRI
Broker, Notary, Property Management
Realtor since 1985
DRE Lic. 00886348
